# National crop insurance scheme (India)

The objectives of the scheme are as under: -

   To provide insurance coverage and financial support to the farmers in the event of natural calamities, pests & diseases.

   To encourage the farmers to adopt progressive farming practices high value in-puts and higher technology in Agriculture.

   To help stabilize farm incomes, particularly in disaster years.


Salient features of the scheme: -

   Crops covered:-

   The crops in the following broad groups in respect of which i) the past yield data based on Crop Cutting Experiments (CCEs) is available for adequate number of years, and ii) requisite number of CCEs are conducted for estimating the yield during the proposed season:

   a. Food crops (Cereals, Millets & Pulses)

   b. Oilseeds

   c. Sugarcane, Cotton & Potato (Annual Commercial/annual Horticultural crops)

   Other annual Commercial/annual Horticultural crops subject to availability of past Yield data will be covered in a period of three years. However, the crops which will be covered next year will have to be spelt before the close of preceding year.

   States and areas to be covered:

   The Scheme extends to all States and Union Territories. The States/Uts opting for the Scheme would be required to take up all the crops identified for coverage in a given year.

   Exit clause: The States/Union Territories once opting for the Scheme, will have to continue for a minimum period of three years.

   Farmers to be covered:


All farmers including sharecroppers, tenant farmers growing the notified crops in the notified areas are eligible for coverage.

The Scheme covers following groups of farmers:

a. On a compulsory basis: All farmers growing notified crops and availing Seasonal Agricultural Operations (SAO) loans from Financial Institutions i.e. Loanee Farmers.

b. On a voluntary basis: All other farmers growing notified crops (i.e., Non-Loanee farmers) who opt for the Scheme.

4. Risks covered & exclusions:

Comprehensive risk insurance will be provided to cover yield losses due to non-preventable risks, viz.:

i) Natural Fire and Lightning

ii) Storm, Hailstorm, Cyclone, Typhoon, Tempest, Hurricane, Torando etc.

iii) Flood, Inundation and Landslide

iv) Drought, Dry spells

v) Pests/Diseases etc.

Losses arising out of war & nucler risks, malicious damage & other preventable risks shall be excluded.

5. Sum insured /limit of coverage:

The Sum Insured (SI) may extend to the value of the threshold yield of the insured crop at the option of the insured farmers. However, a farmer may also insure his crop beyond value of threshold yield level upto 150% of average yield of notified area on payment of premium at commercial rates.

In case of Loanee farmers the Sum Insured would be atleast equal to the amount of crop loan advanced.

Further, in case of Loanee farmers, the Insurance Charges shall be an additionality to the Scale of Finance for the purpose of obtaining loan.

In matters of Crop Loan disbursement procedures, guidelines of RBI/NABARD shall be binding.

S N.

Season

Crops

1.

Kharif

Bajra & Oilseeds

3.5% of SI or Actuarial rate, which ever is less

Other crops (cereals, other millets & pulses)

2.5% of SI or Actuarial rate, which ever is less

2.

Rabi

Wheat

1.5% of SI or Actuarial rate, which ever is less

Other crops (other cereals, millets, pulses & oilseeds)

2.0% of SI or Actuarial rate, which ever is less

3.

Kharif & Rabi

Annual Commercial annual Horticultural crops

Actuarial rates

Transition to the actuarial regime in case of cereals, millets, pulses & oilseeds would be made in a period of five years. The actuarial rates shall be applied at District/Region/State level at the option of the State Govt./UT.

50% subsidy in premium is allowed in respect of Small & Marginal farmers to be shared equally by the Govt. of India and State/UT Govt. The premium subsidy will be phased out on sunset basis in a period of three to five years subject to review of financial results and the response of farmers at the end of the first year of the implementation of the Scheme.

The definition of Small and Marginal farmer would be as follows:

Small Farmer: A Cultivator with a land holding of 2 hectares (5 acres) or less, as defined in the land ceiling legislation of the concerned State/UT.

Marginal Farmer: A Cultivator with a land holding of 1 hectare or less (2.5 acres).

8. Sharing of risk:

Risk will be shared by IA and the Govt. in the following proportion.

Food crops & Oilseeds: Till, complete transition to Actuarial regime in a period of five years takes place, claims beyond 100% of premium will be bone by the Govt. Therefore, all normal claims, i.e. claims upto 150% of premium will be met by IA and claims beyond 150% shall be paid out of Corpus Fund for a period of three years. After this period of three years claims upto 200% will be met by IA and above this ceiling out of the Corpus Fund.

Annual Commercial crops/annual Horticultural crops: Implementing Agency shall bear all normal losses, i.e claims upto150% of premium in the first three years and 200% of premium thereafter subject to satisfactory claims experience. The claims beyond 150% of premium in the fist three years and 200% of premium thereafter shall be paid out of Corpus Fund. However, the period of three years stipulated for this purpose will be reviewed on the basis of financial results after the fist year of implementation and the period will be extended to five years if considered necessary.

To meet Catastrophic losses, a Corpus Fund shall be created will contributions from the Govt. of India and State Govt./UT in 50:50 basis. A portion of Calamity Relief Fund (CRF) will be used for contribution to the Corpus Fund.

9. Area approach and unit of insurance:

The Scheme would operate on the basis of ‘Area Approach’ i.e., Defined Areas for each notified crop for widespread calamities and on an individual basis for localised calamities such as hailstorm, landslide, cyclone and flood. The Defined Area (i.e., unit area of insurance) may be a Gram Panchayat, Mandal, Hobli, Circle, Phirka, Block, Taluka etc. to be decided by the State/UT Govt. However, each participating State/UT Govt. will be required to reach the level of Gram Panchayat as the unit in a maximum period of three years.

Individual based assessment in case of localised calamities, would be implemented in limited areas on experimental basis, initally and shall be extended in the light of operational experience gained. The District Revenue administration will assist Implementing Agency in assessing the extent of loss.

10. Seasonality discipline

a) The board seasonality discipline followed for Loanee farmers will be as under:

Activity

Kharif

Rabi

Loaning period

April to September

October to Next March

Cut-off date for receipt of declarations

November

May

Cut-off date for receipt of yield data

January/March

July/September

The broad cut-off dates for receipt of proposals in respect of Non-loanee farmers will be as under:

a. Kharif season: 31st July

b. Rabi season: 31st December

However, seasonality discipline may be modified, if and where necessary in consultation with State/UT and the Govt. of India.

11. Estimation of crop yield:

The State /UT Govt. will plan and conduct the requisite number of Crop Cutting Experiments (CCEs) for all notified crops in the notified insurance units in order to assess the crop yield.

The state/UT Govt. will maintain single series of Crop Cutting Experiments (CCEs) and resultant yield estimates, both for Crop Production estimates and Crop Insurance.

Crop Cutting Experiments (CCE) shall be undertaken per unit area/per crop. On a sliding scale, as indicated below:

S N.

Unit Area

Minimum number of C.C.E.s required to be done

1.

Taluka/Tehsil/Block

16

2.

Mandal/Phirka/any other smaller unit area comprising 8-10 villages

10

3.

Gram Panchayat comprising 4-5 villages

08

A Technical Advisory Committee (T.A.C.) comprising representatives from N.S.S.O., Ministry of Agriculture (G.O.I.) and IA shall be constituted to decide the sample size of CCEs and all other technical matters.

12. Levels of Indemnity & Threshold Yield:

Three levels of Indemnity, viz., 90%, 80% & 60% is corresponding to Low Risk. Medium Risk & High Risk areas shall be available for all crops (cereals, millets, pulses & oilseeds and annual commercial/ annual horticultural crops) based on Coefficient of Variation (C.V.) in yield of past 10 years’ data. However, the insured farmers of unit area may opt for higher level of indemnity on payment of additional premium based on actuarial rates.

The Threshold yield (TY) or Guaranteed yield for a crop in an Insurance Unit shall be the moving average based on past three years average yield in case of Rice & Wheat and five years average yield in case of Other crops, multiplied by the level of indemnity.

13. Nature of Coverage and Indemnity:

If the ‘Actual Yield’ (AY) per hectare of the insured crop for the defined area [on the basis of requisite number of Crop Cutting Experiments (CCEs)] in the insured season, falls short of the specified ‘Threshold Yield’ (TY), all the insured farmers growing that crop in the defined area are deemed to have suffered shortfall in their yield. The Scheme seeks to provide coverage against sucbcontigency.

‘Indemnity’ shall be calculated as per the following formula:

Shortfall in Yield

x Sum Insured for the farmer

Threshold yield

{Shortfall = "Threshold Yield – Actual Yield’ for the Defined Area}

13A. Indemnity in case of localised risks:

Loss assessment and modified indemnity procedures in case of occurrence of localised perils, such as hailstorm, landslide, cyclone and flood where settlement of claims will be on individual basis, shall be formulated by IA in coordination with State/UT Govt.

The loss assessment of localised risks on individual basis will be experimented in limited areas, initially and shall be extended in the light of operational experience gained. The District Revenue administration will assist IA in assessing the extent of loss.

14. Procedure for approval & settlement of claims:

Once the yield data is received from the State/UT Govt. as per the prescribed cut-off dates, claims will be worked out and settled by IA.

The claim cheques along with claim partiuclars will be released to the individual Nodal Banks. The Bank at the grass root level, in turn, shall credit the accounts of the individual farmers and display the particulars of beneficiaries on their notice board.

In the context of localised phenomenon, viz., hailstorm, landslide, cyclone and flood, the IA shall evolve a procedure to estimate such losses at individual farmer level in consultation with DAC/State/UT. Settlement of such claims will be on individual basis between IA and insured.

15. Financial support towards administration & operating (A & O) expenses:

The A & O expenses would be shared equally by the Central Govt. & respective State Government on sunset basis [100% in 1st year, 80% in 2nd year, 60% in 3rd year, 40% in 4th year, 20% in 5th year and ‘zero’ thereafter.]

16. Corpus fund:

To meet Catastrophic losses, a Corpus Fund shall be created with contributions from the Govt. of India and State/UT. On 50:50 basis. A portion of Calamity Relief Fund (CRF) shall be used for contribution to the Corpus Fund.

The Corpus Fund shall be managed by Implementing Agency (IA).

17. Reinsurance cover:

Efforts will be made by IA to obtain appropriate reinsurance cover for the proposed RKBY in the international Reinsurance market.

18. Management of the scheme, monitoring and review:

In respect of Loanee farmers, the Bank shall collect the premium along with the Declarations and send it to IA within the prescribed time limits. However, in areas where IA has requisite infrastructure, a non-loanee farmer will have option to send premium along with Declaration, directly to IA within the time limits.

Selection of the Banks will be on the basis of Service Area Approach (SAA) of RBI or at the option of the Banks (Where co-operative banks have good network). The Department of Agriculture, Agricultural Statistics, Directorate of Economics and Statistics, Department of Co-operation, Revenue Department of the State Government will be actively involved in smooth implementation of the Scheme.

The Scheme will be implemented in accordance with the operational modalities as worked out by IA in consultation with Dept. of Agriculture & Co-operation.

During each crop season, the agricultural situation will be closely monitored in the implementing State/UT. The State / UT Department of Agriculture and district administration shall set up a District Level Monitoring Committee (DLMC), who will provide fortnightly reports of Agricultural situation with details of area sown, seasonal weather conditions, pest incidence, stage of crop failure {if any} etc.

The operation of the Scheme will be reviewed annually, and modifications as may be required would be introduced. Periodic Appraisal Reports on the Scheme would be prepared by Ministry of Agriculture, the Government of India/Implementing Agency.

19. Implementing Agency (IA):

An exclusive Organization would be set up in due course, for implementation of RKBY. Until such time as the new set up is created, the ‘GIC of India’ will continue to function as the Implementing Agency.

20. Benefits expected from scheme:

The scheme is expected to:

1. Be a critical instrument of development in the field of crop production, providing financial support to the farmers in the event of crop failure.

2. Encourage farmers to adopt progressive farming practices and higher technology in Agriculture.

3. Help in maintaining flow of agricultural credit.

4. Provide significant benefits not merely to the insured farmers, but to the entire community directly and indirectly through spillover and multiplier entire community directly and indirectly through spillover and multiplier effects in terms of maintaining production & employment, generation or market fees, taxes etc. And net accretion to economic growth.

5. Streamline loss assessment procedures and help in building up huge and accurate statistical base for crop production.